ETF's

Discussions about the testing and simulation of mechanical trading systems using historical data and other methods. Trading Blox Customers should post Trading Blox specific questions in the Customer Support forum.
Post Reply
Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

ETF's

Post by Chris67 » Wed Aug 04, 2010 5:12 am

Not sure this is the right location for this one .. but nonetheless

Quick question relating to ETF's - Been looking at them omline - researching the net - if someone wanted, say, exposure to Germany - why would they buy a German ETF when they could buy the DAX PPP spreadbetting and pay no tax, no commission and no wide bid / offer spread ?
I understand that some ETF 's may be offered on markets where spread betting doesnt focus but surely if you want Gold exposure you would be better off buying Gold ppp on CMC/IG Markets ??

Is this just the fact that the general public are still that ignorant as to the benefits of spread betting

Does anyone currently trading ETF 's recommend a dealing location - I spoke to Saxobank - they seem to have it all covered ???

Best
Chris

sluggo
Roundtable Knight
Roundtable Knight
Posts: 2986
Joined: Fri Jun 11, 2004 2:50 pm

Post by sluggo » Wed Aug 04, 2010 8:34 am

Here in the States, many people (ordinary citizens AND investment professionals) have a strong preference for ETFs rather than futures, CFDs, spreadbets, forex, or options. Some of the reasons include
  • ETFs can be traded in a non-margin account. Lots of people are scared of margin, and the government prohibits trading on margin in some types of retirement accounts (IRAs, 401ks, pensions, etc). Most mutual funds, for example, proudly boast that they don't trade on margin, which reassures their customers.
  • ETFs are traded just like stocks and you can do so at Charles Schwab or E-Trade or Fidelity or other brokers which are familiar and comfortable and non-threatening. You don't have to explain to your family and friends why you're doing something new and different at a weird brokerage that doesn't even advertise on TV.
  • Because ETFs are perceived to be "just like stocks" and because stocks are perceived to be far less risky than forex or CFDs or spreadbets or futures or options, the fear of trading ETFs is far smaller than the fear of trading the others.
  • Thanks to Inverse ETFs, you can profit when the price of something falls without going short. People are nervous about derivatives but they are scared to death of shorting.
These emotions are expressed by ordinary citizens AND by huge numbers of investment professionals; generally, those who invest in equities and have never tried more exotic vehicles, i.e.the vast majority.

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Wed Aug 04, 2010 10:33 am

Sluggo - As ever I think you have nailed it and you give an accurate and great picture of the reasons
That being said - what utterly ridiculous reasons - I'm sure there absolutely the way it is but it shows the utter ridiculousness of 99% of people who trade/ invest
I think if more people were aware of spreadbetting they would flock to it
#If you think about the average U.S investor in Mutual funds - the average mutual fund underperforms stocks by x % - the avarege mutual fund has made no mney in 10-15 years - when you add in fees it gets ugly - the average U.S investor could have bought 3 Dollars per point of dow futures in 1995 and probably be hgely better off having poaid no fees and with no tax liabilities (if the tax rules are the same in the U.S as they "currently" are in the U.K)
One day people will cotton on about investing in equities - but that wont happen until the dow is at 3000 and Buffet blows up - FYI I believe that will happen within 36 months - but thats just pessimistic / manic depressive opinianated arrogant old me !!!!!!

LeapFrog
Roundtable Knight
Roundtable Knight
Posts: 695
Joined: Mon May 17, 2004 4:18 pm
Location: Boston, MA

Re: ETF's

Post by LeapFrog » Wed Aug 04, 2010 11:38 am

Chris67 wrote:Is this just the fact that the general public are still that ignorant as to the benefits of spread betting
Spread betting is illegal in the United States - sounds too much like gambling and the general public needs to be protected from themselves.

J D Canning
Roundtable Fellow
Roundtable Fellow
Posts: 74
Joined: Thu Jul 03, 2008 6:35 am
Location: Surrey, UK
Contact:

Post by J D Canning » Wed Aug 04, 2010 12:21 pm

Interesting discussion. The level of ignorance amongst, not only the general public, but also so-called investment "professionals" is truly staggering.

With regard to lack of understanding of financial instruments, it is worth comparing the two sites run by IG Group in the UK. IG Index offers spreadbetting facilities across a range of shares, stock indices, currencies, bonds, interest rates, commodities and ETFs. IG Markets offers CFD facilities across a range of shares, stock indices, currencies, bonds, interest rates, commodities and ETFs. Check out the bid-ask spreads - THEY'RE EXACTLY THE SAME. The only difference between these two instruments is their tax treatment - CFDs attract capital gains tax whereas spreadbetting is tax free under UK tax law (for the time being). AND YET, despite the fact that the counterparty risk is exactly the same, with both of the aforementioned entities being part of the same IG Group, individual investors seem to have an aversion to spreadbetting due to the gambling connotations.

Quite remarkable really.

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Wed Aug 04, 2010 12:29 pm

truly remarkable!!!

I cannot believe that stockbrokers still exist - some plummy nobhead who charges you a big fat commission , charges exhobitant fees and then you get taxed ??? what is that all about ?

Heres another indicator of general public and financial professional stupidity - absolute return funds - sold as funds that always make money (not funds that dont rely on stock markets going up - simply funds that always make money - that is what most are being lead to believe) - I'll have some of that thanks

Then we have - closer to home CTA's which nobody can define and managed futures - according to an article in the WSJ in June (story posted on www.turtletrader.com) hedge funds lost money in June - "hedge funds - also known as trend followers"

The level of knowledge out there is $%^&*( incredible !

J D Canning
Roundtable Fellow
Roundtable Fellow
Posts: 74
Joined: Thu Jul 03, 2008 6:35 am
Location: Surrey, UK
Contact:

Post by J D Canning » Wed Aug 04, 2010 2:00 pm

That's priceless: "hedge funds - also known as trend followers"!!! I love it!

Ignorance and stupidity abound. People, in general, are terrified of money and would much rather entrust their excess money to a so-called expert (or, indeed, stockbroker) than actually get off their fat @rse and actually learn how to invest / trade for themselves.

And there's always the caring hand of government to maintain the status quo and protect vested interests...

Moto moto
Roundtable Knight
Roundtable Knight
Posts: 427
Joined: Mon Jun 01, 2009 4:12 am
Location: once again in the UK

Post by Moto moto » Wed Aug 04, 2010 4:19 pm

its called sales and marketing.
or possibly its just laziness.

Jez Liberty
Roundtable Knight
Roundtable Knight
Posts: 123
Joined: Tue Nov 03, 2009 8:49 am
Location: London
Contact:

Re: ETF's

Post by Jez Liberty » Wed Aug 04, 2010 4:59 pm

Chris67 wrote: Quick question relating to ETF's - Been looking at them omline - researching the net - if someone wanted, say, exposure to Germany - why would they buy a German ETF when they could buy the DAX PPP spreadbetting and pay no tax, no commission and no wide bid / offer spread ?
I havent researched the matter too much but could it not also be that ETFs (_not_ ETNs) offer less counterparty risk than trading with a spread better?

For some reason, I'd be quite wary of having a large exposure with a spread better

td80
Roundtable Fellow
Roundtable Fellow
Posts: 60
Joined: Thu Mar 08, 2007 8:38 pm
Location: Irvine, CA

Post by td80 » Wed Aug 04, 2010 5:54 pm

Holy cats this thread exploded out of left field. It is almost a black swan event for this forum given number of posts over the given time frame.

At any rate I would say one huge driver of spread betting in say, the UK, compared to the U.S. is the tax treatment!

I won't start on my tax rant but let me just say that being a U.S. citizen, and even worse domiciling in the U.S. (versus a foreign country where you get ~80K/year tax exemption), you are truly a slave to the "free republic". They are going to get their money out of you one way or the other.

Many people from other countries are shocked and horrified to find this out, including a friend of mine who became a U.S. citizen (UK expat) without realizing he couldn't (legally) do the tax avoidance he used to do before. He turned 10 shades of white once learning the price to pay for the (apparent) opportunities provided.

Since there is no tax benefit to CFD's for us "global slavizens", and we have liquid options and futures markets (the latter of which currently has more favorable tax treatment then any other short-term instrument to my knowledge), CFD's are somewhat redundant.

Pile that on top of the possible/apparent bucket-shop nature of these spread-betting outfits and you may have credit risk with them to boot.

Edit: Just for posterity (sorry I just had to):

The three countries I am aware of that tax you on global income regardless of your where you are domiciled due to your citizenship are:

Belarus
North Korea
United States of America

What interesting governmental company we find ourselves in!

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Thu Aug 05, 2010 2:53 am

Yes I must say that the credit risk with spreadbetters is huge - I mean IG index or city index that have been around 25 years are sooo risky when compared to banks >?

Personally I would think once again - as with soooo much of the bull in this industry that turns the truth on its head - that spreadbetters are a hugely safer credit risk than many places where the GP have thier funds

If you want to talk real bucket shops then I worked at Goldman for 6 years and saw it from the inside !! I think most people would be truly horrified if they knew what really went on in these so called " blue chip banks and institutions" .

When I left GS and people had asked me where I worked I was treated like some demi-God coz of the GS background - when personally I was embarrassed by the fact I had 6 years on my CV of working in an institution where the term "risk management" was applied only to which car park one put one's ferrari in at the risk of scratching it
Over paid / under talented and rip off merchants - just like all investment banks

Moto moto
Roundtable Knight
Roundtable Knight
Posts: 427
Joined: Mon Jun 01, 2009 4:12 am
Location: once again in the UK

Post by Moto moto » Thu Aug 05, 2010 7:01 am

as a side note - I just read of QBasis offering an ETF for their managed futures fund.

td80
Roundtable Fellow
Roundtable Fellow
Posts: 60
Joined: Thu Mar 08, 2007 8:38 pm
Location: Irvine, CA

Post by td80 » Thu Aug 05, 2010 1:54 pm

In terms of credit risk, please remember some of the firms that went up in smoke were around since long before CFDs were even invented (think Great Depression and earlier).

In terms of GS, well, you know how it is Chris. The biggest scoundrels are loved on Wall Street and the City of London as long as they don't get caught. If they get "caught", then they become the most reviled. The difference between getting "caught" versus not caught are usually driven by political rather than ethical motivations.

Everyone knows there are bad things in the swamp, but hey the swamp throws so much money off that everyone just says "well, that's the swamp for you!" when something goes awry...
Chris67 wrote:Yes I must say that the credit risk with spreadbetters is huge - I mean IG index or city index that have been around 25 years are sooo risky when compared to banks >?

Personally I would think once again - as with soooo much of the bull in this industry that turns the truth on its head - that spreadbetters are a hugely safer credit risk than many places where the GP have thier funds

If you want to talk real bucket shops then I worked at Goldman for 6 years and saw it from the inside !! I think most people would be truly horrified if they knew what really went on in these so called " blue chip banks and institutions" .

When I left GS and people had asked me where I worked I was treated like some demi-God coz of the GS background - when personally I was embarrassed by the fact I had 6 years on my CV of working in an institution where the term "risk management" was applied only to which car park one put one's ferrari in at the risk of scratching it
Over paid / under talented and rip off merchants - just like all investment banks

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Fri Aug 06, 2010 7:32 am

td80 - Whereas I totally agree with how it all works and the mechanics of the situation I dont have to like it - also when anyone in government or elsewhere preaches or comments on ethical behavior or having people's interests at heart - you know its all just a huge amount of Bullshit - Obama / the U.S Govt - all Govts - are just a whole load of immoral , unethical corrupt people - its like the whole BP thing - do any of these politiicinas actually give a dam about anything other than the political endsmeet they can gain from it - its all very dis-heartening - the World is a truly disgusting place which is why I feel myself more and more looking and asking the question "who should one look up to in life" - I see no answers
I think the most poetic represenation I ever heard was from John Lennon in his song GOD - When all is said and done do not follow, worship or beleive in anything on this planet other than yourself - its all you have - the rest is all hypocritial and immoral bullshit !

Bet this posts sparks the forum up - Hope it does - I'd like to hear what peoplke out there believe in and judge themsleves against when the whole world is so filthy, immoral hypocritical and disgusting

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Fri Aug 06, 2010 7:35 am

just one further point - hs anyone out there actually looked at the correlation between the U.S stock market and the President's support
Please please do not tell me any american out there cares about anything other than the Dollars in thier pockets - its the only motivational tool that decides peoples votes
This isnt an anti - american rant - sorry if it appears so - I love America - what I'm saying applies to all countries

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Fri Aug 06, 2010 7:37 am

etf's to God and philosophy ..... !!! how did it happen hehe

td80
Roundtable Fellow
Roundtable Fellow
Posts: 60
Joined: Thu Mar 08, 2007 8:38 pm
Location: Irvine, CA

Post by td80 » Fri Aug 06, 2010 1:10 pm

In terms of people to look up to etc, I think to idolize man is to idolize a beautifully defective being. Since I'm not particularly inclined to religion, I like to look to the natural world in general for inspiration.

At any rate I don't have any empirical data for you regarding stock market performance vs. presidential approval ratings, but I will say as a long standing citizen of the U.S. that the majority of people only focus on the money in their pocket when there is none there.

When they have a bit of a taste, it is off to completely (imho) ridiculous political topics that frankly should be left to local communities to decide in most cases versus making it a national issue.

A beautiful and destructive super-cycle is taking place in which the whole empire (if you will) is devouring itself from within utilizing a convoluted method of essentially printing money and handing it out to powerful special interests.

Foreign powers are enabling this behavior with a huge gambit that when we default (and we will!), they will be net-net ahead even given their huge foreign reserves losses because they will have the infrastructure in place to continue on without us.

Grab some popcorn and your favorite drink because this is going to be an interesting 20 year period assuming we don't blow ourselves up.

Moto moto
Roundtable Knight
Roundtable Knight
Posts: 427
Joined: Mon Jun 01, 2009 4:12 am
Location: once again in the UK

Post by Moto moto » Sat Aug 07, 2010 6:32 am

Could it be that the "whole world is so filthy, immoral hypocritical and disgusting" because we base things on individual pursuits of money?

Always interesting discussion on sites devoted to speculation in the capital markets. I always hope to get a eureka moment to improve my trading ideas from discussions such as these.

Humans are reliably predictably irrational...... so does it always mean that we will have a cycle of destruction and rebirth.... I hope so.

M20J
Senior Member
Senior Member
Posts: 39
Joined: Tue Aug 12, 2008 4:49 am

Post by M20J » Sun Aug 08, 2010 8:00 pm

Many apologies for defending investment professionals, but very many of them trade ETFs not through choice but because their hands are tied by their company's dealing rules. It's not at all uncommon for there to be a blanket ban on trading futures and options. Even though there are restrictions, stocks, unit trusts etc (and thus ETFs) are usually allowed to be traded (although in the UK, a survey by the SII found that 10% of firms applied a blanket ban on all staff dealing).

td80
Roundtable Fellow
Roundtable Fellow
Posts: 60
Joined: Thu Mar 08, 2007 8:38 pm
Location: Irvine, CA

Post by td80 » Sun Aug 08, 2010 8:50 pm

As long as man is interested in reducing risk, there will be opportunities for the likes of us "unsavory" speculators.

Frankly I believe that private speculation is the only honest pursuit in the whole industry exactly because we put our (hopefully) own money on the line every day.

We do, in fact, offer a service in aggregating risk and providing liquidity.

Everybody else is just trying to get into your pockets without taking any risk.
Moto moto wrote:Could it be that the "whole world is so filthy, immoral hypocritical and disgusting" because we base things on individual pursuits of money?

Always interesting discussion on sites devoted to speculation in the capital markets. I always hope to get a eureka moment to improve my trading ideas from discussions such as these.

Humans are reliably predictably irrational...... so does it always mean that we will have a cycle of destruction and rebirth.... I hope so.

Post Reply