Interesting graphs/ETF’s/Bitcoin

The below is a graph that shows the performance of a thing, in the lead in and subsequent launch of that thing via an ETF.

The launch of an S&P500 tracker would be an example of the broad-index ETF. A US Value ETF would be an example of the Smart-beta ETF. A US consumer discretionary ETF would be an example for the sector specific. And the thematic one might be a US ESG tracker. But it can also be something like a luxury good ETFs, rising middle class of China ETF, a climate change tracker (investing in things that benefit from the energy transition), and it can cross asset classes, like an art (paintings, watches) tracker, or NFT (non funigble tokens) and of course it can be things like Bitcoin futures or crypto baskets.

And what often happens is that by the time the product is launched, the prevailing narrative is in the price, i.e. it’s frothy, a bit like (well, exactly like) an IPO, where a private company wants to sell shares to the public because it knows things are fantastic, and that the time to sell out for a lot of money is nigh.

Often the ability to short (a product launch happens, futures exchanges are set) means price discovery, and that price discovery is often a lower number than hopefuls expected prior to launch.

And so these thematic ETF’s are a) negatively correlated to subsequent launch and b) as a result, quite good contra indicators.

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Please note that past performance is not a reliable indicator of future performance.

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